My Debt Snow Ball

My Debt Snow Ball

I accomplished one of my very minor goals recently – I went through and created a comprehensive debt review and plan to pay it off. The Wife and I have way, way, way too much consumer debt. I say consumer debt because I do not feel the need, right now, to compound my problems/overwhelm myself putting the $70Kish in law school loans, my auto loan and mortgage, into the equation.

Once this consumer debt is cleaned up I will probably start a similar debt payoff schedule for those debts.

My plan was to be open and hones with my wife and more importantly myself. While creating this list it became apparent to me, like most people out there, my credit card debt was ridiculous and unnecessary (although, $7,000 or so was from my honeymoon which, if given the choice, I would do again).

However, unlike some bloggers I have absolutely no urge to go through old statements or run them through mint.com or similar website – I spent it irrespective of what it was on, I need to clean it up ASAP.

Need to Make Priorities and Choices when Eradicating Debt

While I have the liquid assets to pay nearly every dollar off, I just can’t bring myself to do it. While some people need/want a $1,000 emergency fund, I feel the need to have closer to $20,000 (and I still don’t feel it’s an adequate cash position).

While this has nothing to do with math, I feel better, a calmness so to speak, knowing that if anything were to happen to my job or the wife’s we could live.

Instead we decided to stop all non-qualified savings. Previous to the plan outlined below, we were saving approximately $1,000 per month. That money is going to be diverted to debt! I have set up a modified debt snowball. Dave Ramsey, who I think coined this idea, states,

“The principle is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted.”

Basically, you are paying off the credit card with the lowest balance so you can retire card after card – but the amount you are paying, in total, stays the same. I know the math is wrong, so I can’t follow it blindly. Here are my debts and the order I plan on paying them:

Prior to my blog (Mid July 2008), I started tracking this number it was a staggering, $16,883.98 broken down as follows:

CitiCard #1

$141.99

AccountCentral (Discover)

$1,758.30

CitiCard #2

$7,797.00

Bank of America (VISA)

$1,344.97

Juniper

–

Discover

$4,979.02

American Express

–

Discover #2

$862.70

Unfortunately I didn’t create the spreadsheet I am working with until after I rolled the two strike through to 0% Discover #1. Regardless, as of today, August 6, 2008, the numbers are broken down as follows:

CitiCard #1

$0

AccountCentral (Discover) 10% Interest

$1,693.56

CitiCard #2 – 0% Interest

$7,797.14

Bank of America (VISA) – 1% Interest

$1,344.97

Juniper

$0

Discover – 0% Interest

$4,979.02

American Express

$0

Discover #2 – 0% Interest

$870.74

We are down to a mind blowing, $16,685.43 (approximately 1.1%). I feel that I will see real results in the next 2 or 3 months when I have my “master plan” up and running at full capacity.

When I feel like I am rolling along I will post my own debt snowball, but for now, if you have any interest in setting up a debt snowball of your own, I would HIGHLY recommend the following link checking out Vertex’s Debt Reduction Calculator. It is simple and is free!

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Evan is the owner of My Journey to Millions which was started to track his journey from a broke debt ridden law school graduate to building a positive balance. Need more Evan? Follow him on Twitter, Contact him or get new posts directly to your email

My Journey to Millions

My Journey to Millions is an 8 year old personal finance blog focused on topics including basic personal finance issues, advanced insurance planning, high net worth estate planning. In addition, there is a particular focus on dividend growth investing and option trading.